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Final Accounts: Exam Based Problems and Answers with Adjustments

Published on: September 26, 2020

Problem and Solution of Final Accounts with Adjustments

Every business firm prepares final accounts at the end of accounting year; here are the best collections of final accounts with adjustments for board exam.

PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 13

The following balances were extracted from ABC Company Ltd as on 31^st December 2019:

Particulars	Amount Dr	Amount Cr
Gross profit		1,86,000
Cash at bank	80,000
Sundry debtors and creditors	25,000	53,000
Bills receivable and payable	90,000	33,500
Salaries	37,000
Investment in shares	90,000
Land and building	480,000
Furniture	50,000
Preliminary expenses	10,000
9% debentures		4,00,000
General reserve		1,25,000
Plant and machinery	220,000
Calls in arrear	20,000
Retained earnings account		47,000
Interest on debenture	36,000
General expenses	23,000
Interim dividend	9,500
Reserve for bad debts		2,000
Closing stock	76,000
Share capital		4,00,000
	12,46,500	12,46,500

Consider the following information:

a. Depreciate plant and machinery by 10% and furniture by 12%

b. Write off the preliminary expenses fully

c. Rs 4,000 is to be provided for income tax

d. Transfer Rs 12,000 to the general reserve

e. Income tax of the last year Rs 2,500 has been paid this year

f. Reserve for bad and doubtful debts to be maintained at 8% on sundry debtors

g. Directors proposed a 10% dividend on paid up capital including interim dividend

Required: (1) Profit and loss account; (2) Profit and loss appropriation account; (3) Balance sheet

[Answer: Net profit = Rs 48,000; Surplus = Rs 42,500; Balance sheet = Rs 10,78,500]

*Tax paid of last year is debited in P&L Appⁿ account and deducted from bank balance

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 14

The trial balance of Swarnim Company Ltd as on 31^st March 2020 as follows:

Particulars	Amount Dr	Particulars	Amount Cr
Land and building	10,00,000	Authorized and issued capital:
Plant and machinery	430,000	(10,000 shares of Rs 100 each)	10,00,000
Preliminary expenses	20,000	Sundry creditors	2,00,000
Calls in arrear	40,000	Reserve fund	50,000
Cash in hand	20,000	P&L appropriation account	50,000
Investment in debentures	40,000	Sales	15,00,000
Bills receivable	30,000	10% debenture of Rs 100 each	5,00,000
Goodwill	40,000
Debtors	80,000
Interim dividend	40,000
Repairs	10,000
Purchase	12,00,000
Sales return	20,000
Advertisement	20,000
Audit fees	5,000
Wages and salaries	1,00,000
Insurance	25,000
Stock at beginning	1,00,000
General expenses	30,000
Debenture interest	50,000
	33,00,000		33,00,000

Additional information:

a. Create a reserve for bad debt at 5% on sundry debtors

b. Provide depreciation on plant and machinery by Rs 53,000

c. Reserve fund to be increased by Rs 10,000

d. Directors proposed a dividend of 10% on paid up capital

e. Write off preliminary expenses by Rs 15,000

f. Make provision for tax at 30%

g. Closing stock Rs 3,00,000

Required: (1) Trading account; (2) Profit and loss account;

(3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 3,80,000; Net profit = Rs 1,17,600;

Surplus = Rs 21,600; Balance sheet = Rs 18,88,000)

*Tax (380,000 – 212,000) @ 30% = Rs 50,400]

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 15

The trial balance of Expo Company Ltd as on 31^st December 2019 is given below:

Particulars	Debit	Particulars	Credit
Cash and bank balance	56,000	Equity share capital of Rs 100 each	4,00,000
Opening stock	1,20,000	10% Debenture	1,00,000
Taxes and rent	25,000	Sale revenue	7,00,000
Purchase	2,50,000	Creditors	36,000
Wages	2,25,000	Bank overdraft	30,000
Discount	10,000	Discount	15,000
Building	3,00,000	Transfer fees	5,000
Carriage inward	5,000	Return outward	10,000
Carriage outward	10,000	Provision for doubtful debts	4,000
Sundry debtors	80,000	Profit and loss account	50,000
Machinery	1,50,000
Furniture	50,000
Loose tools	25,000
Advertisement	10,000
General expenses	15,000
Bad debts	4,000
Debenture interest paid up to 30^th June	5,000
Insurance	10,000
	13,50,000		13,50,000

Additional information:

a. The authorized capital of the company was Rs 6,00,000

b. Stocks on 31^st Chaitra were valued at Rs 80,000

c. Depreciate plant and machinery at the rate of 10%

d. Provision for doubtful debts increased up to Rs 5,000

e. Wages outstanding was Rs 4,000

f. A general reserve is created for Rs 10,000

g. Directors proposed final dividend of 10% paid up capital

h. Prepaid insurance Rs 5,000.

Required: (1) Trading account; (2) Profit and loss account; (3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 1,86,000; Net profit = Rs 101,000;

Surplus = Rs 101,000; Balance sheet = Rs 7,26,000;

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 16

Lumbini Trading Company provides you the following trial balance on 31^st March 2020:

Debit	Amount	Credit	Amount
Opening stock	50,000	Sales	6,20,000
Purchase	4,50,000	Authorized and issued capital:
Cash at bank	74,000	Equity share capital @ Rs 100	2,00,000
Carriage on purchase	25,000	8% preference share capital	2,00,000
8% investment	1,10,000	Share premium	20,000
Wages	45,000	General reserve	75,000
Sundry debtors	35,000	Account payable	38,000
Fixed assets	1,95,000	P&L account last year	12,900
Depreciation written off	20,000
Advance tax paid	66,500
Trade expenses	15,400
Salaries	40,000
Establishment charges	30,000
Calls in arrears	10,000
	11,65,900		11,65,900

Additional information:

a. Stock at end of the year was valued at Rs 2,14,000

b. Dividend to preference shares capital was declared and paid

c. Make provision for bad and doubtful debts at 5% on sundry debtors

d. Make provision for tax at 25% of the profit

e. General reserve to be increased by 20% of net profit after tax

f. Directors proposed a dividend of 10% on paid up capital

g. Interest on investment is due for last three years

Required: (1) Trading & Profit and loss account; (2) Profit and loss appropriation account; (3) Balance sheet

[Answer: Gross profit = Rs 264,000; Net profit = Rs 137,437; Surplus = Rs 87,850;

Bank = Rs 58,000; Balance sheet = Rs 719,150;

Tax (Cr 290,400 – Dr 107,150) @ 25% = Rs 45,813;

Net profit (183,250 – 45,813) = Rs 137,437;

General reserve (Rs 137,437 @ 20%) = Rs 27,487

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 17

The trial balance of Niwas Company Ltd as on 31^st March 2020 is given below:

Particulars	Amount Dr	Amount Cr
Equity share capital (Rs 100 each)		5,00,000
8% Debenture		50,000
Purchase and sales	3,00,000	7,60,000
Calls in arrears	30,000
Opening stock	20,000
Rent and taxes	25,000
Purchase return		5,000
Wages	1,50,000
Carriage	15,000
Salaries	65,000
Salaries outstanding		10,000
Discount	10,000	5,000
Sundry debtors and creditors	1,00,000	25,000
Plant and machinery	2,00,000
Land and building	3,00,000
Patent	1,25,000
General expenses	30,000
Bad debts and provision	3,000	4,000
Debenture interest	4,000
Prepaid insurance	5,000
Advance commission received		10,000
Bank and bank overdraft	48,000	45,000
Profit and loss appropriation account		16,000
	14,30,000	14,30,000

Additional information:

a. the authorized capital of the company was Rs 7,50,000

b. Closing stock valued Rs 15,000

c. Appreciate land and building by 5% and depreciate plant and machinery by 10%

d. Provision for bad debts to be increased by 5%

e. Prepaid insurance expired Rs 3,000

f. The whole amount of advance commission is earned

g. Provision made for income tax Rs 30,000

h. Transfer to general reserve Rs 20,000

i. Directors proposed a dividend @ 10% on paid up capital

Required: (1) Trading account; (2) Profit and loss account

(3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 295,000; Net profit = Rs 134,000;

Surplus = Rs 83,000; Balance sheet = Rs 780,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 18

AM Company Ltd has authorised capital of Rs 10,00,000 divided into 10,000 equity shares Rs 100 each. The trial balance on 31^st December 2019 is given below:

Particulars	Amount	Particulars	Amount
Purchase	5,00,000	Paid up capital:	.
Opening stock	50,000	10,000 equity shares of Rs 50 each	5,00,000
Wages	1,30,000	Sales	10,00,000
Salaries	60,000	5% Debentures (1‒4‒2019)	1,00,000
Discount allowed	10,000	Purchase return	5,000
Sundry debtors	60,000	Discount received	3,000
Plant and machinery	6,00,000	Sundry creditors	32,000
Land	2,00,000	Short term loan	50,000
Furniture (1‒1‒2019)	50,000	Provision for doubtful debts	2,000
Tax paid of last year	20,000	P&L appropriation account	1,28,000
Cash at bank	40,000
8% Investment	30,000
Carriage inwards	10,000
General expenses	20,000
Interest on debenture	2,500
Rent and rates	25,500
Insurance (1‒10‒2019)	12,000
	18,20,000		18,20,000

Additional information:

a. Goods lost by fire worth Rs 50,000 and Insurance Company accepted claim only 80%.

b. Value of closing stock at the end Rs 40,000.

c. Goods worth Rs 2,000 were given as free sample.

d. Part of furniture costing Rs 20,000 was sold for Rs 10,000 on 1^st July 2016 but omitted to record.

e. Depreciate plant and machinery 10% and furniture by 20%.

f. Appreciate land by Rs 50,000.

g. Bad debts written of Rs 2,000 and provision for bad debts is to be increased Rs 5,000.

h. Transfer Rs 25,000 to general reserve and sinking fund 30,000.

i. The directors decided to pay dividend Rs 10 per share.

j. Outstanding wages Rs 10,000 but prepaid salaries Rs 5,000

k. Insurance policy was taken for 12 months.

l. Make provision for tax for the current year Rs 20,000

Required: (1) Trading account; (2) Profit and loss account; (3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 3,97,000; Net profit = 222,150;

Surplus = Rs 175,150; Balance sheet = Rs 10,43,400;

* Furniture, Depn on P&L = Rs 8,000 & Rs 6,000; Loss = Rs 8,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 19

DK Company Ltd has authorised capital of Rs 10,00,000 divided into 7,000 equity shares and 3,000, 8% preference shares of Rs 100 each. The trial balance on 31^st December 2019 is given below:

Particulars	Amount	Particulars	Amount
Salaries	1,00,000	Gross profit	3,34,000
Office expenses	5,000	6% Debentures	2,00,000
Customers	50,000	Commission	5,000
Plant and machinery	3,50,000	Suppliers	35,000
Land and building	4,50,000	Short term loan	95,000
Vehicles (1^st July 2019)	1,50,000	Provision for doubtful debts	3,000
Furniture	40,000	P&L appropriation account	6,000
Tax paid of last year	10,000	Calls in advance	20,000
Bank balance	60,000	Unearned commission	20,000
Interest	8,000	Interest	2,000
Sundry expenses	30,000	Paid up capital:	–
Rent paid	40,000	7,000 shares of Rs 70 each	4,90,000
Advance salary	2,000	2,000, 8% Pref. shares @ Rs 100	2,00,000
Closing stock	45,000
10% investment	50,000
Goodwill	20,000
	14,10,000		14,10,000

Additional information:

a	Depreciate plant and machinery and vehicles by 10% and furniture by 15%.
b	Revalued of land and building Rs 6,00,000.
c	Adjust bad debts 10%, doubtful debts 5% and discount on customers 2%.
d	Suppliers agreed to allow 2% discount.
e	Monthly rent is Rs 4,000.
f	Sundry expenses to be paid Rs 15,000.
g	Bonus payable to employees Rs 25,000.
h	Goodwill revalued Rs 10,000 at the end of the year.
i	Transfer Rs 40,000 to general reserve, assets replacement fund Rs 10,000 and dividend equalization fund Rs 30,000.
j	Provide 10% dividend on paid up capital.
k	Commission earned Rs 10,000
l	The manager was entitled to a commission of 5% on net profit before charging such commission.
m	Make provision of tax 20%.

Required: (1) Profit and loss account; (2) Profit and loss appropriation account; (3) Balance sheet

[Answer: Net profit = Rs 1,33,710; Deficit = Rs 15,290; Balance sheet = Rs 13,18,685;

NP before commission and tax = 507,700 – 206,095 = Rs 301,605

Commission = 301,605 x 5/100 = Rs 15,080

Profit before tax = 301,605 – 15,080 = Rs 286,525

Tax = 286,525 x 20/100 = Rs 57,305

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 20

VC Company Ltd has authorised capital of Rs 7,00,000 divided into 5,000 equity shares and 2,000, 10% preference shares of Rs 100 each. The trial balance on 31^st December 2019 is given below:

Debit	Amount	Credit	Amount
Purchases	3,20,000	Sales	8,00,000
Opening stock	40,000	Equity share capital @ Rs 100 each	5,00,000
Sales return	20,000	10% Preference shares @ Rs 100	2,00,000
Rent and rates	30,000	10% Debentures	1,00,000
Wages	1,20,000	Creditors	20,000
Carriage	30,000	Provision bad debts	2,000
Salaries	70,000	Provision for tax	7,000
Discount	10,000	Transfer fee	1,000
Sundry debtors	90,000	Interest on investment	10,000
Plant and machinery	1,00,000	Purchase return	10,000
Land and building	4,00,000
Patent	1,00,000
General expenses	40,000
Bad debts	5,000
Interest on debenture	8,000
Prepaid insurance	8,000
Cash at bank	27,000
Calls in arrear	10,000
Tax paid of last year	5,000
10% Investment	2,17,000
	16,50,000		16,50,000

Additional information:

a. Prepaid insurance expired Rs 5,000.

b. Adjust bad debts 10,000, doubtful debts 5% and discount on debtor 2%.

c. Creditor is agreed to allow 2% discount.

d. Closing stock of market price Rs 20,000 but cost price Rs 25,000.

e. Wages outstanding Rs 10,000 but prepaid salary is Rs 10,000.

f. Appreciate land and building by 20% and depreciate plant and machinery by 10%.

g. Patents revalued Rs 80,000 at the end of the year.

h. Transfer to general reserve Rs 25,000 and capital reserve Rs 20,000

i. Directors proposed a dividend @ 10% on capital.

j. The manager was entitled to a commission of 5% on net profit after charging such commission.

k. Make provision of tax 25%.

Required: (1) Trading account; (2) Profit and loss account; (3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 2,90,000; Net profit = Rs 135,414;

Surplus = Rs 23,414; Balance sheet = Rs 10,13,180;

NP before commission and tax = 395,100 – 205,520 = 189,580

Commission = 189,580 x 5/105 = 9,028

Profit before tax = 189,580 – 9,028 = 180,552; Tax = 180,552 x 25/100 = 45,138

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 21

The authorized capital of Syntax Manufacturing Ltd was Rs 10,00,000 divided into 10,000 shares of Rs 100 each. The following is the trial balance of the company as on 31^st December 2019:

Particulars	Amount Dr	Particulars	Amount Cr
Plant and machinery at cost	5,00,000	Share capital ( 6,500 shares @ Rs 100)	6,50,000
Debtors	5,03,000	Accumulated depreciation 1^st Jan	1,70,000
Cash at bank	6,07,760	Creditors	1,73,295
Stocks 1^st Jan	2,33,500	Sales during year less returns	26,39,000
Purchases of materials	11,60,000	6% Secured loan	1,80,000
Manufacturing wages	1,30,000	Profit and loss appropriation account	54,705
Other wages	9,270
Power	24,732
Rent	96,000
Audit fee	4,300
Office salaries	2,55,700
Salary and fees	1,05,000
Interest paid on loan	10,800
Sundry administrative expenses	34,940
Sundry production expenses	43,672
Selling expenses	76,326
Advertising	42,000
Advance customs duty	30,000
	38,67,000		38,67,000

Additional information:

The cost of power and rent is regarded as 2/3 production cost; the remainder to be administrative.

Machinery is to be depreciated @ 15% using the straight line method.

The auditors have requested that a provision of 3% of closing debtors be provided for.

The salary and fee are to be divided in 2:1 between production cost and office expenses.

Goods lost by fire Rs 15,000 but no claimed is received from insurance company

Provision for taxation made 50%

BOD decided to set aside Rs 150,000 as general reserve and proposed dividend Rs 75,000.

Stocks were valued as follows:

	1^st Jan 2019	31^st Dec 2019
Cost	233,500	310,000
Market value	236,000	297,000

Required: (1) Trading account; (2) Profit and loss account

(3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 12,24,070; Net profit = Rs 3,09,835;

Surplus = Rs 1,39,540; Balance sheet = Rs 19,22,670;

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 22

The authorized share capital of SVS Company Ltd is Rs 800,000 divided into equal of equity shares and 8% preference shares of Rs 100 each. The trial balance of the company as on 31^st December 2019 is given below:

Particulars	Amount Dr	Amount Cr
Equity share capital @ Rs 100		3,00,000
8% Preference shares @ Rs 100		2,00,000
10% debenture		2,00,000
Opening stock	1,20,000
Rent and rates	25,000
Purchase and sales	4,50,000	10,00,000
Wages	2,25,000
Discount	10,000	15,000
Vehicles	5,50,000
Carriage on purchase	5,000
Carriage on sales	20,000
Debtors and creditors	80,000	30,000
Tax paid and provision for tax (of last year)	10,000	6,000
Machinery	1,00,000
Machinery (purchased on 30^th June)	50,000
Investment in share	50,000
Loose tools	25,000
Salary	60,000
Bad debts and provision for bad debts	4,000	9,000
Calls in arrear and advance	10,000	20,000
Debenture interest up to 30 September	15,000
Insurance	10,000
Transfer fees		5,000
Return outward		10,000
Bank balance and overdraft	56,000	30,000
P&L appropriation account		50,000
	18,75,000	18,75,000